Chrt13: "Blah, blah, blah....patent expirations...blah, blah,blah...earnings extimates...blah, blah, blah." Same old tired line.
Meanwhile, MRK has blown PFE out of the water for years on end and will continue to do so for years to come.
If you like dividend income and are looking for a stock that you're neutral on to write covered calls, PFE is the choice for you. If you're interested in a growth investment, for God's sake don't listen to anything that chrt13 has to say.
I get sick at the thought of having taken that genius's advice on MRK vs. PFE in the past and wouldn't even consider it going forward.
MRK is better managed than PFE in many areas, specially, in their R&D area. You don't see MRK spend a lot of money to buy a company, but all these billions sales product came from their own R&D. PFE bought Phamacia, bought Warner Lambert, and bougth all those liability lawsuits with them. SM was overpaid too much by the BOD, and he had no idea on how to run a big phama. IF PFE in the siuation of Vioxx, it would file a BK already.
Is it also NO PROBLEM if you have to wait until Jan 2012 or 2013 or later, ie up to ten years after you first bought PFE in 2003?
There's surely no guarantee that PFE will have reached your target of $31 by then. If it gains an average of a dollar a year from here, that will take until 2013.
But more likely PFE will linger in the mid to low $20s until after Lipitor expiration, then fund managers will wait to see if the company can grow earnings absent megablockbusters.
If its 2012 profits do indeed attain $2 per share, & earnings are forecast to grow at 5% annually over the next five years & you generously add in another 5% for dividend payout rate, at a PEG ratio of 1.0 for the two kinds of growth, appreciation & income together, then PFE should trade at a multiple of 10, for $20. If pharma should still carry a higher average PEG ratio at that time, then a P/E of 15 might be in order, for share price of $30.
But even should you then cash out for $300,000, that's just a $200K profit, or 200% on the $100K to which you upped your "investment" in 2004, after up to ten years, for annual pre-tax, pre-cost gain of what, 15%?
Way too low a return for such enormous risk from crazy overleverage & underdiversification, as Hotpanera has so wisely pointed out.